Rupee moored near record low as central bank defence persists

By Jaspreet Kalra

MUMBAI(Reuters) -The Indian rupee lumbered in a tight band on Wednesday, holding above its all-time low even as the U.S. dollar continued to charge higher, with traders pointing to likely central bank intervention to support the local currency.

The rupee closed at 88.7975 against the U.S dollar, a whisker away for its all-time low of 88.80 hit last week but little changed on the day.

Traders noted that the Reserve Bank of India has repeatedly defended the rupee near 88.80, keeping volatility in check, but persistent dollar demand from importers has kept it pinned near that level.

The local unit has remained steady around that mark even as the dollar has risen over 1% this week against its major peers, boosted by weakness in the euro and the Japanese yen due to political developments.

The euro was last down nearly 0.4% at $1.1615 while the Japanese yen slipped to 152.90, its weakest level since February.

"The real test for USD bears begins this week as FX quant signals deteriorate for both EUR and JPY," analysts at BofA Global Research said in a note.

Traders also said that in addition to spot market interventions, the RBI has conducted dollar-rupee buy/sell swaps for October delivery of maturities between January and March 2027, over the last three sessions.

Dollar-rupee forward premiums have dropped in response to this, with the 1-year implied yield falling to 2.18%, its lowest since August 29.

Investors are now awaiting the minutes of the Federal Reserve's September policy meeting, due later on Wednesday, alongside remarks from a clutch of central bank policymakers.

(Reporting by Jaspreet Kalra; Editing by Sonia Cheema and Harikrishnan Nair)

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